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Partner Communications Reports Second Quarter 2013 Results1

ARPU totaled NIS 83 in the second quarter of 2013, compared with NIS 82 in the first quarter of 2013, primarily due to a decrease in price erosion together with seasonality effects.

Equipment revenues in the second quarter of 2013 totaled NIS 180 million compared to NIS 183 million in the previous quarter. Equipment profitability improved compared to the previous quarter mainly due to the decrease in handset subsidies to large corporate customers.

As a result of the above effects, the Adjusted EBITDA for the second quarter of 2013 increased to NIS 280 million compared to NIS 268 million in the first quarter of 2013.

Financial expenses in the second quarter of 2013 increased by approximately NIS 22 million compared to the previous quarter, due to increased linkage charges in the amount of approximately NIS 15 million as well as due to a one-time expense of approximately NIS 9 million that was imposed on the Company due to the early prepayment of bank loans.

Despite the improvement in Adjusted EBITDA, net profit totaled NIS 20 million in the second quarter of 2013 compared with NIS 31 million in the previous quarter, due to the said increase in financial expenses.

The Company continued to report robust free cash flow (after interest payments), which totaled NIS 193 million this quarter, an amount similar to that of the previous quarter. Cash flow was positively impacted by the improvement in operating cash flow, which was partially offset by semi-annual interest payments. During the second quarter, the Company made an early prepayment of bank loans amounting to approximately NIS 419 million (approximately NIS 282 million originally maturing in 2014 and approximately NIS 137 million in 2015). Net debt at the end of the second quarter of 2013 amounted to approximately NIS 3.4 billion compared to NIS 4.2 billion at the end of the second quarter of 2012, a decrease of NIS 0.8 billion."

Key Financial Results 5 (unaudited)

NIS MILLION   Q2'13   Q2'12   % Change
Revenues   1,130   1,428   -21%
Cost of revenues 878 1,000 -12%
Gross profit 252 428 -41%
Operating profit 102 245


Net profit 20 120 -83%
Earnings per share (basic, NIS) 0.13 0.77 -83%
Free cash flow   287   313   -8%

Key Operating Indicators:

    Q2'13   Q2'12   Change
Adjusted EBITDA (NIS millions) 280 423 -34%
Adjusted EBITDA as a percentage of total revenues 25% 30% -5
Cellular Subscribers (end of period, thousands) 2,921 3,098 -177
Quarterly Cellular Churn Rate (%) 9.4% 8.9% 0.5
Average Monthly Revenue per Cellular Subscriber (ARPU) (NIS) 83 101 -18%
Average Monthly Usage per Cellular Subscriber (MOU) (minutes) 532 437 +22%
No. of Fixed Lines (end of period, thousands) 294 281 +5%
ISP Subscribers (end of period, thousands)   572   609   -6%

5 See also definitions on first page.

Partner Consolidated Results (unaudited)

  Cellular Segment   Fixed Line Segment   Elimination   Consolidated
NIS Millions   Q2’13   Q2’12   Change %   Q2’13   Q2’12   Change %   Q2’13   Q2’12   Q2’13   Q2’12   Change %
Total Revenues 897   1,156   -22% 286   308   -7% (53)   (36) 1,130   1,428   -21%
Service Revenues 726 949 -23%



-8% (53) (36) 950 1,213 -22%
Equipment Revenues 171 207 -17% 9 8 13% - - 180 215 -16%
Operating Profit 59 231 -74% 43 14 +207% - - 102 245 -58%
Adjusted EBITDA   198   367   -46%   82   56   +46%   -   -   280   423   -34%

Financial Review

In Q2 2013, total revenues were NIS 1,130 million (US$ 312 million), a decrease of 21% from NIS 1,428 million in Q2 2012.

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